R&D Investments in the European ICT sector: Implications for Business Performance

Abstract

BackgroundA significant share of business innovation arises from information and communication (ICT) sector. Business investment into research and development (R&D) activities can be seen as an important basis for innovation, which can further lead to better economic performance. This can be especially true for the ICT sector.ObjectivesThe paper examines the share of the ICT sector on innovation and the total R&D expenditure in selected European countries. Furthermore, our aim is to test the potential positive correlation between R&D expenditure, productivity and the value added in the sector.Methods/ApproachThe goals of the paper has been tested by empirical data analysis using the pane regression analysis. We examined panel data for 24 European countries in the 2008-2016 period.ResultsThe highest share of business R&D expenditure in ICT has been captured in Nordic countries. Firms in ICT appear to be innovative above the average and represent a significant share in the total business R&D expenditure.ConclusionsWe found a positive correlation between R&D expenditure and both value-added and apparent labour productivity in the ICT sector. We believe that this could be to some extent attributed to the innovation of products and processes. Hence, the government support in the form of R&D tax incentives can be also beneficial for the economic performance of ICT firms.

R&D tax incentives and innovation: unveiling the mechanisms behind innovation capacity

“…Adding to this, the non-conversion of tax incentives into innovation through organizational attributes may be related to the lack of knowledge to transform the results of R&D activities into innovation (Hunady et al. , 2020).…”

“…It is also noteworthy that the non-transformation of tax incentives into innovation through the organizational attributes analyzed may be related to managerial factors. Namely, this may involve a lack of knowledge and motivation (Hunady et al. , 2020; Simachev et al.…”

“…It is also noteworthy that the non-transformation of tax incentives into innovation through the organizational attributes analyzed may be related to managerial factors. Namely, this may involve a lack of knowledge and motivation (Hunady et al, 2020;Simachev et al, 2015). While involving other determinants for R&D activities, such as basic science and market demands (Bloom et al, 2019), opportunistic behavior to obtain undue tax advantages (Crespi et al, 2016) and, also, crowding out effects (G omez-Valenzuela et al, 2020.…”

“…Adding to this, the non-conversion of tax incentives into innovation through organizational attributes may be related to the lack of knowledge to transform the results of R&D activities into innovation (Hunady et al, 2020). This substantially involves managerial issues, considering that capacity for innovation is not determined exclusively by investments in R&D, but by other attributes that are part of the organizational reality (Silva and Pedron, 2019).…”

Public Support for Innovation: Changes in Turnover of Granted Companies

“…It is assumed that companies that carry out research and innovation activities achieve higher growth, have higher revenues, incomes and market share, create new jobs, export more, create higher added value, have higher labour productivity and so on (Hunady et al, 2020;Zakić et al, 2020). In other words, it is important for the entire economy and society that businesses introduce innovations and thereby significantly contribute to long-term and sustainable competitiveness.…”